'It's absolutely criminal': Eastern Cape owes small businesses R2.3bn

Eastern Cape finance MEC Mlungisi Mvoko says government departments owe contractors R2.3bn. The department of health is the worst offender and owes more than R2.1bn while the education department owes R154m.
Eastern Cape finance MEC Mlungisi Mvoko says government departments owe contractors R2.3bn. The department of health is the worst offender and owes more than R2.1bn while the education department owes R154m.
Image: Eugene Coetzee

It is absolutely criminal not to pay small businesses, especially at a time like this.

This is the opinion expressed by  Eastern Cape Black Contractors chair Sakhele Skenjana, who was reacting to the Eastern Cape government’s admission that it owes contractors R2.3bn.

Skenjana said while state-owned enterprises were receiving bailouts, small businesses were floundering, and the ripple effects on both the economy and families were devastating, reports HeraldLIVE.

“This is a serious injustice,” he said. “You can just imagine the ripple effects — a small business then cannot pay its employees, who are breadwinners.”

In response to a parliamentary question submitted by DA MPL Bobby Stevenson, Eastern Cape finance MEC Mlungisi Mvoko said 18,174 invoices totalling R2.3bn were more than 30 days in arrears.

Skenjana, who said the problem had been going on for at least two years, said he hoped there was light at the end of the tunnel.

“It looks like we are finding each other. We met with the provincial treasury, and now processes have been put in place to track invoices,” Skenjana said, adding that the organisation was pleased that premier Oscar Mabuyane had launched an app to track invoices "but results have not yet been realised”.

Skenjana said in some parts of the country, SMMEs were paid within seven days. “There is no reason it can’t be the same here,” he said.

He said SMMEs had to watch as state-owned enterprises were bailed out time and again while their businesses were in serious difficulty.

“Nonpayment of SMMEs is criminal and it is destroying the core [economy] of the province. We view this as a very serious issue. It is a serious injustice,” he said.

Skenjana said at a time like this, with the Covid-19 pandemic ravaging the economy, it was more important than ever for small businesses to be paid.

“Even the Covid-19 [financial] support, I would put my head on a block and say less than 10% of SMMEs [nationally] benefited, and almost 0% in our province.

“The government must come to the party and sort this out,” he said.

Stevenson agreed, saying: “There is no place for a job-crushing administration in these times.” Businesses were already battling to make ends meet and pay staff.

“This nonpayment for work runs contrary to any commitment to economic recovery,” Stevenson said.

In his response, Mvoko said the treasury had contacted the various departments to ensure payments were made more quickly.

Stevenson called on the government to pay the businesses to get money flowing into the economy.

The department of health made up the bulk of invoices, owing in excess of R2.1bn.

“The reasons given for the health department’s nonpayment of suppliers was that voted funds were depleted. This means that, as at the end of February 2020, the department no longer had funds to pay suppliers.”

Stevenson said this was unacceptable.

He said Mvoko revealed the second-worst performer was the department of education, which owed just more than R154m.

“The provincial treasury needs to urgently intervene to ensure suppliers are paid within 30 days, with a special focus on addressing the backlog in the department of health,” Stevenson said.

A Nelson Mandela Bay architect said his company had to wait nearly two years to be paid for work it had done for the provincial education department. It was eventually paid towards the end of last year.

“The work incorporated the design of two new schools, both huge projects. They owed us R4m but just didn’t pay,” he said. “Eventually after 18 months, after many calls, e-mails and lawyers’ letters, they paid, together with R700,000 in interest.”

The architect, who asked not to be named for fear of being blacklisted, said there were a number of firms in the same sector still waiting for their money from the provincial government.

“Often, the department involved will fail to pay the contractor, who will then suspend everything and walk off site. The holding costs can then run into millions for which the department, and ultimately the taxpayer, is liable.”

Eastern Cape treasury spokesperson Mzukisi Solani said the provincial executive had instructed the department to form a “war room” to address supplier payments in the health and education sectors.

“In this regard, additional to other interventions, engagements were held in the past financial year with both departments.”

He said other interventions were made to help departments, including the development of a web-based online invoice inquiry application to expedite payment.

The application, HIBPEC, which stands for Have I Been Paid Eastern Cape, went live on October 10.

“This allows service providers to log calls to check the status of their invoice payment. The service is doing well and will be rolled out to all departments this financial year. The study on root causes for accruals and payables is in its final stages for a report to be produced,” Solani said.

Nelson Mandela Bay Chamber of Commerce CEO Nomkhita Mona called on government to ensure payments.

“Given the scale and urgency of these outstanding payments, the Nelson Mandela Bay Chamber of Commerce calls upon the provincial government, and the department of health in particular, to act in good faith and ensure their payment processes are well managed in this time of crisis.

“Economic activity in the Eastern Cape has slowed down as seven million people practise social distancing to stem the spread of Covid-19 in our province.

“As a result, businesses in the region — big and small, registered and informal — are facing weeks and months of exceptionally poor trading conditions, which significantly constrains their revenue and cash on hand. For many businesses, the revenue lost in this period represents a permanent loss rather than a mere timing difference,” she said.

Mona said for businesses of all shapes and sizes, and especially SMMES, cash flow scrutiny would be crucial in the days and months ahead.

“The government must endeavour not to worsen the liquidity challenges these businesses already face,” she said.

- HeraldLIVE

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